Material Change Of Risk

There is often confusion about what is a material change in risk? It boils down to would the insurance company have charged more premium if they knew about the change? Would the insurance company have refused the risk if they knew about the change?

An example of a material change in risk would be declaring that you were not transporting explosives in your vehicle. You are being paid to carry nitroglycerin in your truck to a job site. Since it is within your knowledge and control the insurance company now has the right to void your policy. This is prevented if you have notified the insurer.

If you have notified the company of the change then the insurance company can either charge an additional premium to keep the contract in force which would have to be paid within 15 days of written notice or the insurer can return the unearned portion of premium if any and cancel the policy.

It is very important to let your agent or broker know of any change in operations or unusual activity that you may now be starting that was not declared at the beginning of your insurance term. If you are not sure then check with your agent or broker.

Unfortunately ignorance is no excuse, you must protect yourself by providing full disclosure. Utmost honesty is a part of insurance contracts.